PM Daily Market Commentary - 10/29/2013

By davefairtex on Tue, Oct 29, 2013 - 11:04pm

Gold closed down -8.30 to 1344.50 on moderate volume, and silver closed up +0.03 to 22.53 on light volume.  The gold/silver ratio dropped -0.45 to 59.68.  Today it was gold's turn to get hit, although the move down was relatively modest, and gold remains above its 50 MA.

The buck was up +0.31 [+0.38%] to 79.70; it looks like the dollar found support at 79, and the dollar bounce seems to be accelerating.

GDX sold off today, down -2.86% on moderate volume, GDXJ down -4.5% on moderately heavy volume.  GDX is now back below its 50 day MA, and wiped out the last 3 days of gains using the now-familiar trick of rallying early, and then selling off for the rest of the day.  Miners definitely seem to be saying we've reached a peak in PM at least in the near term.

We have a two-day Fed FOMC meeting starting today, with the usual announcement occurring at 14:00 tomorrow, which will most likely bring with it a certain amount of volatility.

Risk is increasing; the dollar's bounce, along with the GDX/GDXJ moves suggest PM weakness may be ahead.



1 Comment

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5784
hussman explains: how QE pumps the market

The following is a pretty dense paragraph containing a lot of finance-speak, but re-read it a few times and you might find it to be a pretty good description of what people are doing these days.  Examples: junk bonds, hedge funds buying single family homes.

Still, the rate of monetary growth has been breathtaking in recent years, relative to history, so it’s important to understand the mechanism by which QE has exerted its effects more recently. Simply put, quantitative easing impacts stock prices by creating a mountain of zero-interest cash that must be held by someone at each point in time. The hope and mechanism behind QE is to force those cash holders to feel so distressed that they reach for yield in speculative assets they would otherwise choose not to hold. The process ends at the point where investors are indifferent between holding zero-interest cash and more speculative securities such as long-term bonds or stocks. At this point, every speculative security is priced to achieve the lowest possible risk premium that investors are willing to accept. And here we are.

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